A midday rally Tuesday gave way to a surge of selling in the final hour, pushing most major stock market indexes lower.
Some analysts said investors were spooked by a weaker-than-expected consumer confidence report. But others said the session amounted to no more than overdue profit-taking.
The Dow industrials closed down 110.15 points, or 1.1%, at 9,872.60. The Dow was off 151 points early in the day, then rallied as high as 9,992 before sellers retook control late in the session.
The Nasdaq composite index was up as much as 24 points before closing with a loss of 5.26 points, or 0.3%, at 1,935.97.
Losers outnumbered winners by 17 to 14 on the New York Stock Exchange and by 19 to 18 on Nasdaq in active trading.
"We've had a very strong move upward in the market since Sept. 21 and a pullback was almost overdue," said Hugh Johnson, chief investment officer at brokerage First Albany Corp. "The consumer confidence data was more of a disappointment than a surprise, and was the catalyst--or excuse--for some profit-taking."
The Conference Board said its confidence index fell this month. It had been expected to rise.
The stock market failed to take much comfort in soothing words from Federal Reserve Gov. Laurence Meyer. In a speech to the St. Louis chapter of the National Assn. for Business Economics, Meyer said Fed policymakers have room to lower short-term interest rates further and shouldn't be afraid to do so.
Calls on the Fed to "keep its powder dry" and await evidence of a worsening U.S. economy are "misguided--indeed the reverse of what would be appropriate," Meyer said, according to Bloomberg News.
The Fed's key short-term rate now is 2%, a 40-year low. Policymakers meet again on Dec. 11.
Meyer's tone appeared to help calm the Treasury bond market, where yields have rebounded dramatically in recent weeks, in part on expectations the Fed is finished easing credit.
The two-year T-note yield fell to 3.03% from 3.17% on Monday. The 10-year T-note fell to 4.92% from 5.01%.
Comments by Fed Bank of Chicago President Michael Moskow also led some investors to conclude the Fed may cut rates in December. He damped expectations for a quick economic rebound when he said the nation is "likely facing a period of quite sluggish economic activity," Bloomberg News reported.
In commodities trading, oil prices jumped on expectations that Iraq will halt exports in response to demands from President Bush that the country admit United Nations weapons inspectors. Near-term crude futures in New York rose 79 cents to $19.48 a barrel.
On Wall Street, the big debate remains whether stocks have rebounded too quickly from their lows reached after the Sept. 11 terrorist attacks. Prices may already reflect any turnaround in corporate earnings in 2002, some bearish analysts say.
"I don't think it takes a whole lot right now to turn sentiment more toward caution than being aggressive," said Richard A. Dickson, technical analyst at Hilliard Lyons. "With the extent of the rally we've had, it doesn't take a lot for people to say it's not a bad idea to book some profits."
Among Tuesday's highlights:
* Stocks leading the Dow lower included Home Depot, off $2.17 to $43.35 on worries about the company's earnings outlook; IBM, down $2.13 to $114.20; and Microsoft, off $1.40 to $63.74.
* Internet-related shares pulled back after soaring Monday. EBay eased 39 cents to $64.77, Yahoo lost 67 cents to $17.40 and Amazon.com fell 73 cents to $11.48.
* Some energy stocks posted modest gains as oil rallied. Baker Hughes added 49 cents to $33.02, Anadarko Petroleum rose 79 cents to $53.19 and ChevronTexaco was up 42 cents to $85.62.
* Some tech shares bucked the market's downward trend. EMC gained $1 to $17.85 after a Merrill Lynch report said the firm could "reconquer" the data-storage market with an array of new products.
* Investors pulled back from major drug stocks. Bristol Myers Squibb fell $1.35 to $54 and Novartis lost $1 to $36.07.